E.36 Fundamental and current tax law Flashcards

A tax structure where the tax rate increases as income rises, meaning higher-income individuals pay a larger percentage of their income in taxes.

The rate at which the last dollar of taxable income is taxed, based on the taxpayer’s income bracket.

The portion of an individual’s or business’s income that is subject to taxation after deductions and exemptions.

A fixed amount that taxpayers can subtract from their taxable income without itemizing deductions, reducing their overall tax liability.

Specific expenses, such as mortgage interest and medical expenses, that taxpayers can deduct from their income instead of taking the standard deduction.

A dollar-for-dollar reduction in tax liability, directly lowering the amount of tax owed, such as the Child Tax Credit or the Earned Income Tax Credit.

A tax on the profit earned from the sale of investments, such as stocks or real estate, categorized as either short-term (ordinary tax rates) or long-term (preferential tax rates).

A parallel tax system designed to ensure that high-income individuals and corporations pay at least a minimum amount of tax by limiting deductions and exemptions.

Investment accounts, such as traditional IRAs and 401(k)s, where taxes on earnings and contributions are postponed until withdrawal.

A deduction allowing eligible pass-through businesses to deduct up to 20% of their qualified business income, subject to limitations based on income and business type.